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What is the right loan for you?
When it comes to choosing the right mortgage, a myriad of options are available to help meet varying financial situations and goals. It’s important to work with a professional who will guide you to the right mortgage and explain why it’s the right one. There are many different mortgage loan programs, but the main ones are listed below.
Conventional Loan
The overwhelming majority of mortgage loans originated in the United States are conventional loans. These loans are administered by Fannie Mae and Freddie Mac. Most times, obtaining a conventional loan ensures that you are getting the best priced loan option available. You can obtain a conventional loan with as little as a 3% down payment and a 620 credit score. Conventional loans are known for offering flexible guidelines for all types of borrowers
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Jumbo Loan
For loans that exceed the conventional loan limits, a jumbo loan is available. Excellent credit and 10% or more down payment are required. Guidelines are more restrictive and jumbo loans typically follow the 2-2-2 rule…2 years employment history; 2 years credit profile; and 2 years living in the United States. Jumbo loans tend to be priced a bit higher than conventional loans.
Reverse Mortgage Loan
California offers three types :
- Home Equity Conversion Mortgage (HECM): Insured by FHA, for homeowners aged 62+.
- Proprietary Reverse Mortgage: Private, not FHA-insured, higher limits for valuable homes.
- Single-Purpose Reverse Mortgage: From government/non-profits, for specific needs, lower fees.
Consult our specialists to select the right option, with eligibility, terms, and fees in mind. Unlock your home's value with our guidance.
Government Insured Loans / FHA & VA /
The US government doesn’t lend to borrowers directly but, instead, guarantees (or insures) certain mortgages in order to make homeownership accessible to more borrowers. Government-insured loans protect the mortgage lender against losses if you fail to repay your loan. These loans offer the greatest flexibility and, in most cases, very competitive pricing for borrowers with lower credit scores and a limited down payment.
Loan Options
Non-Qualified Mortgage Loans
Non-QM offers alternative documentation for borrower qualification. Ideal for those with complex income sources, it entails higher rates and increased down payment. Examples of Non-QM loans include:
- Bank Statements: Self-employed borrowers can utilize 12-24 months of bank statements for income calculation.
- Debt Service Coverage Ratio (DSCR): Limited to investment properties, rental income determines loan eligibility based on coverage of PITIA payment.
Fixed Rate Mortgage
A fixed-rate mortgage is ideal for borrowers who prefer a predictable monthly payment set for the entire loan term. This allows the borrower to avoid the risk of rising interest rates. A fixed-rate loan term can be anywhere from 5 to 30 years for conventional, government, and jumbo loans. Non-QM loans can have a loan for up to 40 years.
Adjustable-Rate Mortgage (ARM)
An ARM loan offers a lower initial payment for a fixed period, which varies from 1/6/12/36/60/84/120 months. After this period, it becomes a variable loan, adjusting every 6 or 12 months. ARM loans have a maximum interest or Life Cap, ensuring borrowers know the highest possible rate. Adjustments follow the Promissory Note rules: Fully Indexed Rate (Index + Margin) rounded to the nearest eighth. The preferred index is typically SOFR. Lenders must provide the "Consumer Handbook on Adjustable-Rate Mortgages" and Loan Estimate, indicating adjustments and maximum rate. An Initial ARM Disclosure details the index, margin, adjustments, floor, and maximum rate.
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Loan Repayment Plans
Fully Amortizing Loan
A fully amortized loan is a type of loan where the borrower pays off the balance based on the loan's amortization schedule. The loan is completely paid off by the end of its term, given that the borrower makes complete payments based on the loan's amortization schedule. Traditional fixed-rate mortgages are examples of fully amortizing loans. At the beginning of a fully amortized loan, more of the payment goes to interest than principal.